Summary

Government Expenditure and Revenue Scotland (
GERS)
addresses three questions about Scotland's public sector accounts
under the current constitutional arrangements:

What revenues were raised in Scotland?

How much did the country pay for the public services that
were consumed?

To what extent did the revenues raised cover the costs of
these public services?

GERS
is a National Statistics publication. It is assessed by the
independent
UK Statistics Authority
to ensure that it meets the Code of Practice for Official
Statistics.

The estimates in
GERS
are consistent with the
UK Public Sector
Finances published in July 2017 by the Office for National
Statistics (
ONS).
Feedback from users of the publication is welcome. A
correspondence address is available in the back leaf of the
publication. Comments can be emailed to
economic.statistics@gov.scot.

Recent changes to
GERS

A number of methodological and presentational changes have
been introduced in the publication this year. These include
changes to the methodologies used to estimate a number of taxes.
These were consulted on with the Scottish Economic Statistics
Consultation Group (
SESCG)
and formed part of a wider public consultation. The changes are
discussed in the main chapters of the publication, and are
summarized in the Scottish Government response to the
consultation.
[1]

The
ONS has
reclassified Scottish, Welsh, and Northern Irish housing
associations
[2] into the public sector, bringing the devolved
administrations into line with the treatment applied in England
since 2015. On average, the change increases Scottish public
sector revenue by around £360 million a year and public
sector expenditure by £530 million a year. This produces a
small deterioration in the Scottish net fiscal balance since
2008‑09. The changes to the treatment of housing
associations elsewhere in the
UK similarly impacted
on the overall
UK net fiscal
balance.

Scotland's revenue

Table S.1 shows two estimates of Scotland's public sector
revenue: (i) excluding North Sea revenue, and (ii) including an
illustrative geographical share of North Sea revenue. Estimates
including a population share of North Sea revenue are available
in the main chapters.

Non-North Sea revenue in Scotland grew by 6.1% in 2016-17,
similar to that for the
UK as a whole, 6.2%.
This relatively strong growth is driven by increased national
insurance contributions and corporation tax revenue. The increase
in national insurance contributions reflects the impact of policy
change, such as the abolition of the contracting out rebate,
whilst the increase in corporation tax in part reflects weaker
business investment, which reduces tax-deductible
allowances.

Including an illustrative geographical share of the North
Sea, total Scottish revenue was £58.0 billion, an increase
of 6.3% between 2015-16 and 2016-17. This is faster than the
growth in non‑North Sea revenue, reflecting the increase in
Scottish North Sea revenue, which grew from £56 million in
2015-16 to £208 million in 2016-17. This is the first time
that Scottish North Sea receipts have increased since 2011-12.
Although Scottish North Sea receipts increased, Scottish North
Sea
GDP continued
to decline.

Scotland's non-North Sea revenue was 8.0% of total
UK revenue in
2016-17.

Table S.1: Total Revenue: 2012‑13 to
2016‑17

£ million

2012-13

2013-14

2014-15

2015-16

2016-17

Scotland - Excluding North Sea revenue

48,912

50,805

52,640

54,446

57,743

Scotland - Including North Sea revenue
(geographical share)

53,556

54,252

54,014

54,501

57,952

As % of
UK total
revenue

Scotland - Excluding North Sea revenue

8.1%

8.1%

8.0%

8.0%

8.0%

Scotland - Including North Sea revenue
(geographical share)

8.8%

8.6%

8.2%

8.0%

8.0%

As % of
GDP

Scotland - Excluding North Sea revenue

37.2%

36.8%

36.6%

37.4%

38.5%

Scotland - Including North Sea revenue
(geographical share)

35.9%

34.8%

34.4%

35.0%

36.4%

UK - including
all North Sea revenue

36.1%

36.1%

35.8%

36.2%

37.0%

Table S.2 below shows estimates of revenue per person for
Scotland and the
UK. Excluding North Sea
revenue, revenue per person in Scotland is lower than the
UK average by
£349 in 2016-17, and has been consistently lower by around
£300 in earlier years.

Including an illustrative geographical share of North Sea
revenue, the difference between revenue per person in Scotland
and the
UK is quite variable.
In the latest year, including an illustrative geographical share
of North Sea revenue, revenue per person was £312 lower
than the
UK average.

Table S.2: Revenue per person: Scotland and
UK 2012‑13 to
2016‑17

£ per person

2012-13

2013-14

2014-15

2015-16

2016-17

Scotland

Excluding North Sea revenue

9,199

9,527

9,832

10,118

10,684

Including North Sea revenue (geographical
share)

10,072

10,174

10,089

10,129

10,722

UK

Excluding North Sea revenue

9,467

9,808

10,134

10,451

11,033

Including North Sea revenue

9,562

9,879

10,160

10,450

11,035

Difference (Scotland minus
UK)

Excluding North Sea revenue

-268

-281

-302

-333

-349

Including North Sea revenue (geographical
share)

511

295

-71

-321

-312

Scotland's expenditure

Table S.3 below shows estimates of total managed expenditure
for Scotland and the
UK, the measure of
overall public spending in the
UK public sector
finances. Expenditure increased from £69.0 billion in
2015-16 to £71.2 billion in 2016-17. Scotland's share of
UK expenditure is
relatively stable over the period, at around 9.2%.

Expenditure as a share of
GDP excluding
the North Sea increased in Scotland in 2016‑17, whilst
falling in the
UK. In part, this
reflects weaker nominal
GDP growth in
Scotland. However, spending growth in Scotland has also been
higher than the
UK as a whole,
primarily driven by increased spending by Local Government in
Scotland and Scottish public corporations.

Expenditure as a share of
GDP including
an illustrative geographical share of the North Sea increased
slightly more than as a share of Scottish
GDP excluding
the North Sea in 2016-17. This reflects the decline in North Sea
GDP discussed
above.

Table S.3: Public Sector Total Managed Expenditure:
2012‑13 to 2016‑17

2012-13

2013-14

2014-15

2015-16

2016-17

Scotland - £ millions

68,094

67,581

68,487

69,048

71,209

Share of
UK (%)

9.3%

9.2%

9.1%

9.2%

9.2%

As % of
GDP

Scotland - excluding North Sea

51.8%

49.0%

47.6%

47.4%

47.5%

Scotland - including geographic share of
North Sea

45.6%

43.4%

43.6%

44.4%

44.7%

UK - including
all North Sea

43.3%

41.9%

41.0%

40.0%

39.4%

Table S.4 below shows estimates of expenditure per person for
Scotland and the
UK. Expenditure for
Scotland has been consistently higher per person than the
UK average over the
period. The increase in expenditure per person in Scotland in
2016-17 primarily reflects increases in capital expenditure in
Scotland, driven by increased spending by Local Government in
Scotland and Scottish housing associations.

Table S.4: Total Managed Expenditure per person: Scotland
and
UK 2012‑13 to
2016‑17

£ per person

2012-13

2013-14

2014-15

2015-16

2016-17

Scotland

12,807

12,673

12,792

12,832

13,175

UK

11,472

11,468

11,618

11,555

11,739

Difference (Scotland minus
UK)

1,334

1,205

1,174

1,277

1,437

Scotland's Overall Fiscal Position

GERS
provides two measures of Scotland's fiscal position, the current
budget balance and the net fiscal balance.

The current budget balance shows the difference between
revenue and current expenditure. It therefore excludes public
sector capital investment. It measures the degree to which
taxpayers meet the cost of paying for day‑to-day public
services, excluding capital investment. It is shown in Table S.5
below.

Excluding North Sea revenue, the current budget balance for
Scotland tends to move in line with the figure for the
UK, although the
deficit in Scotland is typically around 6 percentage points
larger. In 2016-17, the Scottish current budget balance excluding
the North Sea improved by 1.7 percentage points, the same as for
the
UK. When including the
North Sea, the movement in Scotland's current budget balance is
more variable, and does not follow the same pattern as the
UK. However, between
2015-16 and 2016-17 Scotland's current budget balance including
the North Sea revenue also improved by 1.7 percentage
points.

Table S.5: Current Budget Balance: Scotland and
UK 2012‑13 to
2016‑17

£ million

2012-13

2013-14

2014-15

2015-16

2016-17

Scotland - Excluding North Sea

-14,796

-13,792

-12,989

-11,983

-9,776

Scotland - Including North Sea (geographical
share)

-10,153

-10,345

-11,615

-11,927

-9,568

UK

-82,786

-70,094

-57,440

-40,491

-8,053

As % of
GDP

Scotland - Excluding North Sea

-11.3%

-10.0%

-9.0%

-8.2%

-6.5%

Scotland - Including North Sea (geographical
share)

-6.8%

-6.6%

-7.4%

-7.7%

-6.0%

UK

-4.9%

-4.0%

-3.1%

-2.1%

-0.4%

The net fiscal balance measures the difference between total
public sector expenditure and public sector revenue. It therefore
includes public sector capital investment, such as the
construction of roads, hospitals, and schools, which yields
benefits not just to current taxpayers but also to future
taxpayers. It is shown in Table S.6 below.

Table S.6: Net Fiscal Balance: Scotland and
UK 2012‑13 to
2016‑17

£ million

2012-13

2013-14

2014-15

2015-16

2016-17

Scotland - Excluding North Sea

-19,181

-16,776

-15,847

-14,602

-13,465

Scotland - Including North Sea (geographical
share)

-14,538

-13,329

-14,473

-14,546

-13,257

UK

-121,904

-102,074

-94,388

-72,119

-46,215

As % of
GDP

Scotland - Excluding North Sea

-14.6%

-12.2%

-11.0%

-10.0%

-9.0%

Scotland - Including North Sea (geographical
share)

-9.7%

-8.6%

-9.2%

-9.3%

-8.3%

UK

-7.2%

-5.8%

-5.1%

-3.8%

-2.4%

The net fiscal balance tends to move in the same way as the
current budget balance, but is approximately 2 percentage points
larger when expressed as a share of
GDP. This
reflects the fact that capital spending is relatively stable as a
share of total spending over time.

The charts overleaf show the estimates of the current budget
balance and net fiscal balance for Scotland and the
UK since 1998-99.
Consistent with other economic statistics, tables in the
accompanying spreadsheets contain figures back to 1998-99.

Net Fiscal Balance: Scotland &
UK 1998-99 to
2016-17

Current Budget Balance: Scotland &
UK 1998-99 to
2016-17

Box S.1:
GERS
Frequently Asked Questions

The Scottish Government receives many questions from users about
GERS.
Below is a summary of some of the most frequently asked questions
and their answers.

Q: Is
GERS
a description of the whole Scottish economy?

A : No.
GERS
reports only on public sector revenue and expenditure. Although
these may be affected by economic performance,
GERS
does not directly report on Scotland's wider economy. If users are
interested in the measurement of the economy as a whole, they
should examine other economic statistics products, such as the
quarterly Gross Domestic product figures (
www.gov.scot/gdp) or
Quarterly National Accounts Scotland (
QNAS,
www.gov.scot/snap). These
publications provide estimates of real terms growth in the economy,
and
GDP in cash or
nominal terms and its components.

Q: What is the public sector?

The public sector contains all government bodies, and all bodies
which are controlled by government. This includes publicly
controlled businesses, such as Scottish Water or the Bank of
England. Following recent decisions by the
ONS,
housing associations are now included in the public sector. In
GERS,
the Scottish Government, Scottish Local Authorities, and the public
corporations they control, such as Scottish Water and Scottish
housing associations, are all considered to be Scottish bodies. All
other
UK public sector bodies
are described as 'Other
UK Government
bodies'.

Q: Who produces
GERS?

A:
GERS
is produced by Scottish Government statisticians. It is designated
as a National Statistics product, which means that it is produced
independently of Scottish Ministers and has been assessed by the
UK Statistics Authority
as being produced in line with the Code of Practice for Official
Statistics. This means the statistics have been found to meet user
needs, to be methodologically sound, explained well and produced
free of political interference.

Q: How do you decide on changes that are made to
GERS?

A: In line with the Code of Practice for Official Statistics,
changes are only made to
GERS
after consultation and discussion with users. This includes
discussion at the annual Scottish Economic Statistics Consultation
Group,
[3] which brings together users of economic statistics from
industry, academia and the wider public sector. An annual
consultation exercise, open to all, is also carried out every year
to allow all users of
GERS
to comment on planned and suggested changes to
GERS.

Q: Do you use company headquarters to assign corporation
tax or taxes like
VAT?

A: Corporation tax on trading profits is estimated on a
company-by-company basis, depending on the economic activity each
company has in Scotland, not location of company headquarters.
VAT is a consumption
tax, and is therefore estimated based on purchases that are made in
Scotland, rather than the location of a company's head office.

Q: How do taxes from the whisky industry feature in the
GERS
estimates?

A: Like any industry, the whisky industry's activity in Scotland
generates tax revenue through a range of sources, such as
corporation tax on profits, income tax and national insurance
contributions on staff earnings, and non-domestic rates payments on
business premises. These are all captured in the estimates of
Scottish public sector receipts reported in
GERS.

In addition, whisky consumed in the
UK is subject to
VAT and alcohol duty.
This is assigned to Scotland on the basis of how much is consumed
in Scotland. Whisky which is exported does not generate
UKVAT or alcohol duty.
There is no export duty in the
UK.

Q: What are Accounting Adjustments and why do they feature
in the
GERS
estimates?

A: Accounting adjustments are used to present revenue and
expenditure on a National Accounts basis, the international
reporting standards used by governments. They normally reflect
non-cash items, such as depreciation or pensions liabilities. In
general, these adjustments do not affect the net fiscal balance or
current budget balance, as they are added to both revenue and
expenditure. In 2016-17, accounting adjustments added £4.3
billion to the estimate of Scottish public sector revenue and
£5.1 billion to the estimate of Scottish public sector
spending. Comparable accounting adjustments are also contained in
the estimates of
UK public sector spending
and revenue. For more information on accounting adjustments and
where they appear in the revenue tables, see Table A.9.

Q: Is spending that does not occur in Scotland included in
the estimates of Scottish public spending?

A:
GERS
aims to capture all spending that benefits the residents of
Scotland. This means it assigns Scotland a share of some
expenditure which takes place outside Scotland. It also means that
it does not assign to Scotland expenditure which occurs in Scotland
but benefits non-Scottish residents.

For example, expenditure on embassies occurs outside Scotland,
but provides benefits to Scottish residents and companies, such as
Scottish tourists requiring consular services. As such, Scotland is
allocated a population share of this expenditure in
GERS.
Likewise, spending on museums in Scotland benefits visitors from
the rest of the
UK, so not all of this
spending is assigned to Scotland in
GERS.

Q: Why does
GERS
refer to public sector revenues rather than taxes?

A: Public sector revenue covers all income received by the
public sector. Although this is mostly taxes, there are some forms
of revenue which are not taxes. These include income made by public
corporations, such as Scottish Water, or dividend income from
companies in which the government holds shares. This year's edition
of
GERS
provides a breakdown of revenue into tax and non-tax
categories.